Crew members of China's surveillance ship Haijian 50 take pictures as they sail on waters near the disputed islands, called Senkaku in Japan and Diaoyu in China, in the East China Sea on Sept. 14, 2012.

The standoff between China and Japan over a group of uninhabited islets in the East China Sea continues to escalate, raising fears that the world’s second and third largest economies could stumble into armed conflict. On Friday, six Chinese patrol boats approached the Japanese-controlled islands, which are called Diaoyu in Chinese and Senkaku in Japanese. That was four more China Maritime Surveillance vessels than China had previously acknowledged dispatching to the islands northeast of Taiwan. “It is deplorable that the invasion of the territorial waters happened at this time and we strongly request that the Chinese authorities leave our territory,” Japan’s Chief Cabinet Secretary Osamu Fujimura told reporters Friday morning.

On Friday China’s Ministry of Foreign Affairs described the patrol as a “rights defense law enforcement action, to reflect the Chinese government’s jurisdiction over the Diaoyu Islands and safeguard China’s maritime rights and interests.” China was infuriated by the Japanese government’s purchase last week of three of the five islands for $26 million from a Japanese family that has claimed ownership to them for decades. China called the move illegal and a violation of Chinese sovereignty. Taiwan, which also claims the Diaoyu, accused Japan of infringing on its territory.

On Friday afternoon Japan’s Kyodo News Service reported that all six of the Chinese ships had left the waters surrounding the islands, bringing a temporary easing of the dispute. But concerns remain over the potential for a clash or even an accidental collision that could see risk of fighting between the two sides. “How serious is this? It’s bloody serious,” says Ian Storey, a senior fellow at Institute of Southeast Asian Studies in Singapore. “The Chinese are incensed by this, and it comes a particularly sensitive time.”

China’s ruling Communist Party has been preparing for this fall’s Communist Party congress, which is expected to see President Hu Jintao and Prime Minister Wen Jiabao begin handing over power. The man expected to take over Hu’s position, Vice President Xi Jinping, hasn’t been seen in public for nearly two weeks, fanning speculation about his health and political future. Confrontation with Japan doesn’t help the harmonious image the party wants to portray during the transition, but it has no incentive to compromise on an issue of sovereignty either. “In the run-up to the party congress certainly the government can’t be seen as being weak,” says Storey. “The response would be a nationalist backlash.” At the same time, the conflict with Japan has helped draw domestic attention from questions about China’s leadership, and a robust response helps boost the Communist Party’s legitimacy. “Since the 1990s … nationalism has replaced Communism as the justification for the one-party state, which requires stirring up anti-Western – above all, anti-Japanese – sentiment,” Ian Buruma, an author and professor at Bard College, wrote in Friday’s South China Morning Post. “This is never difficult in China, given the painful past, and it usefully deflects public attention from the failings and frustrations of living in a dictatorship.”

Anti-Japanese protests have erupted in several Chinese cities in recent weeks. On Aug. 27 a man ripped the Japanese flag from a car carrying the Japanese ambassador while it was stopped behind two vehicles in Beijing. While the rallies have remained small and closely monitored by police, there is a history of such demonstrations turning violent, as when hundreds of rioters threw rocks and smashed windows at the Japanese Embassy in Beijing in 2005. On Friday Japan repeated a warning to its citizens in China to pay attention to their personal safety, and listed six cases of Japanese being harassed or assaulted because of their nationality, including one person who had noodles dumped on them.

Unlike Chinese disputes with some of its Southeast Asian neighbors over South China Sea claims, the Diaoyu conflict carries the added weight of Imperial Japan’s brutal wartime occupation of China. The Diaoyu Islands fell under Japanese control after the First Sino-Japanese War in 1895, when Japan took over Taiwan and its surrounding islands. After World War II the U.S. administered the Diaoyu, returning them to Japanese administration in the 1970s. China argues the islands have long been recognized as its territory. Japan says the Diaoyu were no man’s land before 1895 and should be considered part of Okinawa. As with most disputes over islands in the western Pacific, the potential for undersea oil and gas reserves raises the stakes for all claimants. While the U.S. says it doesn’t take a position on the island’s sovereignty, it says that as they are administered by Japan they fall under the U.S.-Japan Mutual Defense Treaty, meaning the U.S. could be obligated to aid Japan in the event of an attack on them.

The last time tensions reached this level was in 2010, when Japan’s coast guard detained a Chinese fishing boat captain who rammed their vessels near the Diaoyu. But recent events have raised the animosity even higher. This spring Tokyo Governor Shintaro Ishihara said that he wanted to purchase four of the islands from the Kurihara family. The family bought the islands in the 1970s from the descendants of a Japanese businessman who ran a fish processing plant there in the early 1900s. Japan’s central government, feeling that it would be less provocative to have the islands in its possession than under the control of the aggressively nationalist Ishihara, bought them instead. But the distinction has made little difference to China. In mid-August a group 14 Chinese activists sailed from Hong Kong and landed on the Diaoyu, where they were detained by Japanese authorities and returned. Days later a group of Japanese nationalists made their own trip to the Diaoyu, which set off protests in several Chinese cities.

After Japan confirmed it had purchased the islands, China reported a series of Diaoyu baselines—land points from which maritime claims are delineated—to the U.N. That puts China in the position of having to defend those claims. “The baseline announcement implies that China needs to follow it up with actions,” says Stephanie Kleine-Ahlbrandt, the North East Asia director for the International Crisis Group, an ngo that seeks to prevent armed conflict. “The presence of Chinese law enforcement vessels in the area will increase the chances that the Japanese coast guard feels it needs to respond. If there is an incident it will be extremely difficult to walk back given the current state of diplomatic relations, the delicate Chinese transition and the high-pitched nationalist sentiment in China.” That sentiment will only increase in the coming days. September 18 is the 81st anniversary of the Mukden Incident, which saw the launch of a broad Japanese invasion of Manchuria. It 2010 the anniversary, coming shortly after the detention of the Chinese fishing boat captain, triggered broad protest in China, and it likely will again this year.